Aviation in a ‘purple patch’ amid new plane crunch


KUALA LUMPUR: The aviation industry is experiencing a “purple patch” with demand for seats far outstripping capacity amid a long wait for new aircraft and a shortage of pilots further discouraging any fresh competition, Tan Sri Tony Fernandes, the founder of low-cost carrier AirAsia, says.

Malaysia-based AirAsia for its part is set to witness its “best ever period” with most of the carrier’s 240 planes back in the sky and “airfares at their best,” Fernandes said during an interview near Kuala Lumpur International Airport yesterday.

“I’ve never been this bullish before,” Fernandes, who started AirAsia 23 years ago, said. “South-East Asia is going through a renaissance period of sensible economics, and that’s a good thing.

”On the back of that, AirAsia plans to raise as much as US$600mil in coming months, Fernandes said, as he tries to pull off a merger between his two aviation businesses – long-haul carrier AirAsia X Bhd and short-haul airline AirAsia, which is currently a unit under Fernandes’ more diversified company Capital A Bhd. Following the merger, which is expected to conclude mid-year, the new entity will look to raise up to US$400mil via selling equity, Fernandes said.

Citigroup Inc and US advisory bank Evercore Inc have been appointed to lead the capital raising. A US$200mil revenue bond, securitised against revenue from new routes, is also expected to be finalised soon, he said.

Fernandes said the merger of the two airlines will create a new firm called AirAsia Group that will subsequently take over AirAsia X’s listing on Bursa Malaysia. The company may also do away with its AirAsia X branding as the aviation businesses consolidate.

AirAsia has ambitions to expand its footprint from a predominately Asian airline to a global low-cost carrier with a more extensive network. It plans to start flying to Kazakhstan, its first route in Central Asia, later this year.

Fernandes, who has previously spoken about succession at the company he founded, said yesterday that he would retain an advisory role at AirAsia group following the merger. He’ll remain chief executive of Capital A, his other listed company that will ultimately hold all the non-aviation businesses he’s started.

Those include Teleport, a logistics company, and Move, an online travel agency that also operates a ride-hailing business. Move is finalising a US$30mil capital raising while Teleport has raised US$35mil in debt, he said. — Bloomberg

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